Pointers to Review in Economics  World Bank – formerly known as the

International Bank of Reconstruction and

Economic Growth – increase in a country’s productive Development; provides financial advice and
capacity; measured by comparing GNP with the economic research
goal, economic equity  International Monetary Fund – grants loans
to countries to help them stabilize their
Productivity rate > Population growth rate currency
 John Maynard Keynes – most important
Economist of the 20th century
 Price Index – average prices that changed over time  Government – The biggest single spender in
 GNP Price Deflator – measures the change in the the National Economy
average price of goods and services produced by the
economy in a year Why do governments intervene?
 Deliver public goods and services
GNP Price Deflator = Nominal GNP/Real GNP x 100  Redistribute income
 Stabilize the market
 Consumer Price Index – average changes in the retail
prices of a market basket Sources of Government Funds
 Market basket – goods and services commonly  Tax from the Bureau of Internal Revenue
purchased for consumption in a period of time and Bureau of Customs

CPI = Total weighted price of the current/base yr x 100 Classification of Taxes

 Human Development Index – a measure of economic  Direct – property of individuals and
development and economic welfare businesses – Personal income tax,
o Life expectancy at birth, average education corporate tax, property tax and estate tax
levels and standard of living  Indirect – taxes that can be passed on to
 Economic stagnation – economic growth = population others – VAT, tariffs or duties, excise tax
growth
 Population grows faster than the economy Fiscal Policy – Deals with the use of government revenues
 Economic Retrogression – pop grows faster than the and expenditures to stabilize the economy
GNP and per capita income
Financial SECTOR
Significance of Economic Growth
 Improved standard of living and quality of life Money – anything which the market accepts as payments
 More opportunities for investment and profit for goods and services
 Income for the government Commodity Money –
Metallic Money – Fully bodied (face value = metal)
Factors affecting economic growth Token Money – face value > metal
 Economic Factors Paper Money – Notes issued by the state or bank
o Land
o Labor Gold and Silver bullions – mercantilism
o Capital Check – convenient and safer
o Entrepreneur Credit card – plastic money
 Non economic Factors
o Scientific breakthroughs Kinds of Money
o Peace and order  Standard money – metallic form
o Political Stability  Paper money – sub for metallic money
o Culture  Token money – subsidiary coins
o Constitution  Fiat money – paper money by gov’t

Economic Development – stability over a long period of Functions of Money

time  Medium of exchange
 Standard of value
NEDA (National Economic and Development Authority)  Store of value
-established during Marcos  Standard of deferred payment

Characteristics of Money
Consumer Sector  Stability of value
Business Sector  Durability
 Portability
Public Sector
 Divisibility
 Ease of recognition
 Philippine Deposit Insurance Corporation –
protects depositors and strengthens public  Uniformity
confidence in the banking system  Flexibility
Financial Institutions – facilitate and regulate the flow of
money supply in the economy (banks, non banks)
Commercial bank – most important financial institution
Thrift banking system – savings and mortgage banks,
private dev’t banks, stock savings and loan associations
and microfinance thrift banks
- Provides short term working capital
- Accumulated savings of its depositors
Non-banking institutions
National Accounts(Computation)
National Income – earning of the 4 factors = land +
labor + capital + organization
Disposable Personal Income – take home pay
Nominal GNP – market value of all final goods and
services measured in current year prices
Real GNP - market value of all final goods and services
measured in base year (constant prices)
Circular flow model is a model of the economy that
shows:
The circular flow of expenditures and incomes that
result from decision makers’ choices and
The way those choices interact in markets to
determine what, how, and for whom goods and
services are produced.
<Markets
A market is any arrangement that brings buyers
and sellers together and enables them to get
information and do business with each other.
Goods markets are markets in which goods and
services are bought and sold.
Factor markets are markets in which factors of
production are bought and sold.
<Households and Firms
Households are individuals or people living
together as decision-making units.
Firms are institutions that organize production of
goods and services.
•Gross domestic product (GDP)
–measures the output produced by factors of
production located in the domestic economy
•Gross national product (GNP)
–measures the total income earned by domestic
citizens
•GNP = GDP + net income from abroad

Three measures of national output

 Expenditure
the sum of expenditures in the economy
Y=C+I+G+X–Z
 Income
the sum of incomes paid for factor services
wages, profits, etc.
 Output
the sum of output (value added) produced in the
economy